The Blackrock tale told in the UK : ETFs & Robo-advisors
Thomas Bata, the founder of Bata Shoe, was fond of telling the story of how he sent two salesmen to explore market potential in Africa. One cabled back to the home office: “No one here wears shoes. No potential.” The second salesman cabled: “Everyone here is barefoot. Infinite potential.”
Blackrock, the i-shares founder, came to London to the first thematic conference, focused only on robo-investing and told the audience a similar tale. As Paolo Sironi highlights in his 60″ FinTech talk from Robo-Investing Europe 2016:
In the US 50% of ETF volume is from retail; whereas in Europe it is 5%.
Robo-advisors in Europe are lagging to the US in both numbers of Robo-advisor startups and in number of financial institutions adapting the technology. We can go on and on, with more facts showing Europe behind the US; Assets under management, Number of customers, ETFs vs. mutual funds etc.
Is Brexit referendum impairing our vision? Are we seeing the glass half empty? What is the market opportunity in robo-investing?
The UK “inventory” of robo-advisor Fintechs
There are 6 Fintechs in the B2B space, with white label offerings, or modules to build in a few weeks a tailored made solution, or to serve financial advisors.
There are 13 Fintechs in the B2C space which I split into first generation robos and second generation robos:
I consider first generation robos those that deal only with ETFs, mostly use MPT (Modern Portfolio theory) theory for asset allocation, and rarely have “Can I reach you?” capabilities.
|Fiver a Day|
|Money on toast|
I consider second generation robos those that allocate investments not only to ETFs, but stocks or mutual funds; are focused on risk management for re-balancing; allow for partly discretionary management (i.e. 100% auto asset allocation) and partly DIY (non-discretionary management); offer “Can I reach you?” services.
From these 13 Robo-advisors that are targeting consumers directly, 5 are also available in other European countries
|ETF matic||UK+5 European countries|
|Money farm||UK – Italy|
|Scalable Capital||UK – Germany|
I-say about the UK:
The word on the Street is that:
today’s UK inventory of 13+6 robo-advisory Fintechs, will triple if not quadruple by year-end.
Some home grown in the UK, some moving to London from mainland Europe.
Not much evidence of US robo-advisory businesses moving to Europe via the UK. The reasons for this, merit a separate post to explain why these bridges are not being built.
There have been rumors from early 2016 that three of the large four banks in the UK, Barclays, Royal Bank of Scotland, and Lloyds, will launch some kind of robo-advisory service.
UK banks still rumored to launch “robo-advisors”
I-say the market opportunity in the UK is invisible to the naked eye. Whether it will come about from the Blackrock tale – shift in ETF adaptation from retail – or from the unadvised market opportunity – assets sitting un-invested under mattresses and in stale deposit accounts; will be our next inquiry into this space. Stay tuned.